EUR/USD Price Forecast: Recovery targets 1.1900 and beyond
- EUR/USD builds on Friday’s advance and reclaims 1.1700 and above.
- The US Dollar remained on the back foot on shutdown jitters, Fed.
- Investors will look at the JOLTs report in the very near term.
The Euro (EUR) carried its rebound into Monday, with EUR/USD building on Friday’s momentum and breaking through the key 1.1700 level. The rally, however, ran into some near-term resistance around 1.1750 for now.
The daily move was driven by renewed pressure on the US Dollar (USD). In addition, US Treasury yields fell across the spectrum, weighed down by government shutdown worries and persistent bets on more Federal Reserve (Fed) interest rate cuts later this year.
Fed still looking for its footing
The Fed trimmed rates by 25 basis points on September 17, pointing to a softer labour market while acknowledging inflation remains “somewhat elevated”.
The latest dot plot pencilled in another 50 basis points of easing before year-end, smaller trims stretching through 2026 and 2027, and a median 2025 policy rate of 3.6%. Policymakers also nudged growth forecasts slightly higher to 1.6%, kept unemployment at 4.5%, and left inflation projections unchanged.
There were differences of opinion inside the room. Incoming governor Stephen Miran pushed for a deeper half-point cut, though no one else joined him.
In his press conference, Chair Jerome Powell highlighted weaker job creation, softer consumer spending, and inflation running at 2.7% on the headline PCE and 2.9% on the core. He blamed tariffs for part of the inflation stickiness but noted services inflation is easing. Powell described the balance of risks as “more balanced”, signalling the Fed is edging toward neutral rather than preparing an aggressive easing cycle.
When he spoke again on September 23 at the Greater Providence Chamber of Commerce, Powell admitted the Fed faces a “challenging situation” as inflation could reignite even as weak job growth puts pressure on the labour market.
ECB in no hurry to move
The European Central Bank (ECB) left rates unchanged earlier this month, sticking to its meeting-by-meeting strategy. Officials said inflation remains broadly aligned with the 2% medium-term goal, with core inflation projected to average 2.4% in 2025 before easing to 1.9% in 2026 and 1.8% in 2027.
President Christine Lagarde described policy as being in a “good place,” with risks more evenly balanced. She also emphasised that any changes will depend squarely on the data.
Trade tensions simmering in the background
Trade frictions between Washington and Beijing have cooled somewhat after both sides agreed to a 90-day truce. But tariffs remain steep: the US maintains a 30% levy on Chinese imports, while China continues to apply a 10% duty on American goods.
Across the Atlantic, the US and EU recently struck a deal that saw Brussels cut tariffs on US industrial goods and grant wider access for American agricultural and seafood products. In return, Washington imposed a 15% tariff on most EU imports. That said, auto tariffs are still unresolved and could resurface.
Speculative appetite wanes
Positioning data show traders have been trimming bullish bets on the Euro. According to the Commodity Futures Trading Commission (CFTC) for the week ending September 23, net longs fell to around 114.3K contracts, the lowest since July. At the same time, institutional net shorts shrank to about 165.8K contracts, or multi-week lows. Additionally, open interest rose to a two-week high of around 859.2K contracts.
Technical picture
EUR/USD has started the week on the front foot.
That said, a deeper retracement could expose the provisional 100-day Simple Moving Average (SMA) at 1.1594, which reinforce the weekly low at 1.1574 (August 27) and then August trough at 1.1391 (August 1).
In case bulls regain the initiative, a move toward yearly peaks above 1.1900 could start re-emerging on the horizon. The key upside marker sits at the 2025 ceiling of 1.1918 (September 17). A clear break would open the way to the psychological 1.2000 level.
Signs from momentum indicators have improved somewhat:The Relative Strength Index (RSI) is above 50, which means that buyers are now regaining composure. The Average Directional Index (ADX), on the other hand, is just below 15, which means that the overall trend still lacks muscle.
EUR/USD daily chart
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What could spark the next move?
The pair may have room to bounce further in the near term, but a lasting breakout likely needs a stronger catalyst: perhaps a dovish surprise from the Fed, reduced appetite for US assets, progress on trade disputes, or clearer signals that the ECB is content to stay on hold.
Euro FAQs
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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Author
Pablo Piovano
FXStreet
Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.
